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Here's Why You Should Hold on to GDS Holdings Stock for Now
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Key Takeaways
GDS Holdings fell 29.8% in six months; 2026 revenues are projected to rise 17.4%.
GDS booked a record 470 MW in H1'26, fueled by AI demand and hyperscale customer wins.
GDS faces margin pressure from higher utility costs and debt tied to capital-intensive expansion.
GDS Holdings Limited (GDS - Free Report) stock has declined 29.8% over the past six months against the marginal rise of the industry and the Zacks S&P 500 Composite's 14.6% return.
6-Month Share Price Performance
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for GDS’s 2026 revenues is set at $1.9 billion, implying 17.4% year-over-year growth. For EPS, the consensus mark for 2026 is pegged at $2.23, indicating a lofty 1,073.7% year-over-year upsurge.
Image Source: Zacks Investment Research
Factors That Augur Well for GDS’s Success
Solid Booking Momentum: During the second-quarter 2026 earnings call, William Huang, the CEO, said that GDS Holdings is well-positioned to meet rising demand for computing power and AI infrastructure as China’s leading tech players and emerging AI leaders drive the adoption of advanced agentic models. The company can leverage its customer relationships, presence across China, execution bandwidth and financing capabilities to strengthen its position.
Driven by rising AI demand, record bookings reached 470 megawatts in the first half of 2026, backed by 260 megawatts recorded during the second quarter of 2026. These figures are backed by business wins from each of the three largest hyperscale customers and strong relationships with a group of emerging AI leaders, which have the potential to generate incremental demand in the future. Management’s optimism appears high as the full-year sales target is expected to be 1 gigawatt.
Improving Revenue Visibility: In the second quarter of 2026, GDS Holdings’ area under construction increased 43.9% sequentially and 28.8% from the year-ago quarter. Customers have already committed to a significant chunk of capacity that has not yet entered service, as evidenced by an 89.2% pre-commitment rate for area under construction, painting a clear picture of forward revenue visibility.
GDS’s area in service gained 10.8% year over year in the second quarter of 2026. The company’s operational capacity is significantly high, as the commitment rate for area in service is at 92.4% during the second quarter of 2026. That being said, a jump in utilization rate from 77.5% to 79.2% in the second quarter of 2026 signals substantial improvement in operational capacity usage.
Growth via Backlog Conversion: Customers request GDS Holdings to reserve deployable capacity at the same site for future needs. For the first half of 2026, the company secured an additional 600 megawatts of reservations from its customers, representing customer-committed capacity that has not yet fully reached the revenue-generating stage. Management stated that a substantial proportion of backlog is anticipated to become billable within six to eight quarters.
During the second quarter of 2026, net additional area utilized was 21,307 sqm, hinting at committed capacity progressing through this process. Customers are moving into delivered capacity rather than bookings accumulating. A high backlog provides a peek into future growth as committed capacity moves toward delivery and customer move-ins.
Risks Faced by GDS Holdings Limited
High Utility Costs Affect Margin: Despite a 6.5% year-over-year rise in the top line during the second quarter of 2026, accompanied by a 2.5% uptick in adjusted EBITDA, GDS Holdings’ margin declined by 220 basis points year over year to 45.5%. This decline was caused by utility costs representing a higher percentage of the top line.
Electricity holds a major chunk of data center operating expenses. Considering that this expense increases consistently, it could curb the extent to which AI demand raises revenues, translating into EBITDA growth.
Sizable Debt & Capital-Intensive Expansion: The company invests in land, power infrastructure and data-center construction. GDS Holdings raised its capital expenditure outlook for 2026 amid robust demand. The company holds significant short- and long-term debt as a result of exponential pipeline increases in funding requirements, which could keep leverage high despite the company’s solid liquidity position.
GDS’s Zacks Rank & Stocks to Consider
The company currently carries a Zacks Rank #3 (Hold).
View the Zacks #1 Rank List
Image: Bigstock
Here's Why You Should Hold on to GDS Holdings Stock for Now
Key Takeaways
GDS Holdings Limited (GDS - Free Report) stock has declined 29.8% over the past six months against the marginal rise of the industry and the Zacks S&P 500 Composite's 14.6% return.
6-Month Share Price Performance
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for GDS’s 2026 revenues is set at $1.9 billion, implying 17.4% year-over-year growth. For EPS, the consensus mark for 2026 is pegged at $2.23, indicating a lofty 1,073.7% year-over-year upsurge.
Factors That Augur Well for GDS’s Success
Solid Booking Momentum: During the second-quarter 2026 earnings call, William Huang, the CEO, said that GDS Holdings is well-positioned to meet rising demand for computing power and AI infrastructure as China’s leading tech players and emerging AI leaders drive the adoption of advanced agentic models. The company can leverage its customer relationships, presence across China, execution bandwidth and financing capabilities to strengthen its position.
Driven by rising AI demand, record bookings reached 470 megawatts in the first half of 2026, backed by 260 megawatts recorded during the second quarter of 2026. These figures are backed by business wins from each of the three largest hyperscale customers and strong relationships with a group of emerging AI leaders, which have the potential to generate incremental demand in the future. Management’s optimism appears high as the full-year sales target is expected to be 1 gigawatt.
Improving Revenue Visibility: In the second quarter of 2026, GDS Holdings’ area under construction increased 43.9% sequentially and 28.8% from the year-ago quarter. Customers have already committed to a significant chunk of capacity that has not yet entered service, as evidenced by an 89.2% pre-commitment rate for area under construction, painting a clear picture of forward revenue visibility.
GDS’s area in service gained 10.8% year over year in the second quarter of 2026. The company’s operational capacity is significantly high, as the commitment rate for area in service is at 92.4% during the second quarter of 2026. That being said, a jump in utilization rate from 77.5% to 79.2% in the second quarter of 2026 signals substantial improvement in operational capacity usage.
Growth via Backlog Conversion: Customers request GDS Holdings to reserve deployable capacity at the same site for future needs. For the first half of 2026, the company secured an additional 600 megawatts of reservations from its customers, representing customer-committed capacity that has not yet fully reached the revenue-generating stage. Management stated that a substantial proportion of backlog is anticipated to become billable within six to eight quarters.
During the second quarter of 2026, net additional area utilized was 21,307 sqm, hinting at committed capacity progressing through this process. Customers are moving into delivered capacity rather than bookings accumulating. A high backlog provides a peek into future growth as committed capacity moves toward delivery and customer move-ins.
Risks Faced by GDS Holdings Limited
High Utility Costs Affect Margin: Despite a 6.5% year-over-year rise in the top line during the second quarter of 2026, accompanied by a 2.5% uptick in adjusted EBITDA, GDS Holdings’ margin declined by 220 basis points year over year to 45.5%. This decline was caused by utility costs representing a higher percentage of the top line.
Electricity holds a major chunk of data center operating expenses. Considering that this expense increases consistently, it could curb the extent to which AI demand raises revenues, translating into EBITDA growth.
Sizable Debt & Capital-Intensive Expansion: The company invests in land, power infrastructure and data-center construction. GDS Holdings raised its capital expenditure outlook for 2026 amid robust demand. The company holds significant short- and long-term debt as a result of exponential pipeline increases in funding requirements, which could keep leverage high despite the company’s solid liquidity position.
GDS’s Zacks Rank & Stocks to Consider
The company currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader Zacks Business Services sector are Figure Technology Solutions, Inc. (FIGR - Free Report) and Gartner (IT - Free Report) , each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Figure Technology has a long-term earnings growth expectation of 56.9%. FIGR delivered a trailing four-quarter earnings surprise of 28.2%, on average.
Gartner has a long-term earnings growth expectation of 18.5%. IT delivered a trailing four-quarter earnings surprise of 13.5%, on average.